NC hospitals fight bill that would benefit free-standing surgery centers

relder@newsobserver.comMay 9, 2013 

CORRECTION: There are 114 ambulatory surgery centers operating in North Carolina. A previously reported number was inaccurate. Correction made at 3:15 p.m. Friday, May 10, 2013.

RALEIGH -- Hospital representatives flooded the halls of the General Assembly this week to lobby for more funding and against a proposal that would allow same-day surgery centers to sidestep the state’s certification process.

Members of the N.C. Hospital Association told lawmakers they have been hit hard by federal and state cutbacks and that losing surgery patients to stand-alone centers could cost them as much as $400 million a year.

“We are struggling; that’s the main message I want legislators to hear,” said Tim Rice, chief executive officer of Greensboro-based Cone Health, a member of the N.C. Hospital Association delegation that met with Senate Leader Phil Berger, House Speaker Thom Tillis and other legislators.

The association is fighting a bill in the House that would relax the state permitting requirements for outpatient surgical centers that offer a single medical specialty, such as orthopaedics or ophthalmology.

Also known as ambulatory surgery centers, these stand-alone facilities started popping up in the 1970s and have expanded along with the trend toward shorter post-operative hospital stays and increases in outpatient surgeries.

The more than 5,000 outpatient surgery centers in the U.S. that are certified for Medicaid reimbursements provide about 40 percent of all outpatient surgeries, including more than half of all cataract procedures, according to the Ambulatory Surgery Center Association. About 90 percent of all stand-alone centers are owned by physicians, according to the association, and only 3 percent are owned entirely by hospitals.

A provision in the House bill would prohibit hospitals from developing their own stand-alone surgery centers in North Carolina, saying it is “a costly and unnecessary economic burden to the public.”

The state Department of Health and Human Services must issue a certificate of need before medical facilities such as hospital rooms, surgical centers and others can begin accepting patients. DHHS officials say the process prevents unnecessary duplication of medical facilities and is intended to keep costs down.

But supporters of House Bill 177 say requiring certificates of need limits competition and drives patient bills even higher. The bill has been discussed but not voted on by the Health and Human Services Committee.

“Hospitals have rigged the system. The certificate-of-need process protects their monopoly, so patients have to pay more,” said Dana Cope, executive director of the State Employees Association of North Carolina, which is supporting the bill. “Hospital surgery costs are increasing by 8.2 percent per year, four times the rate of inflation.”

Also backing the certificate-of-need amendment is the N.C. Orthopaedic Association, which commissioned Strategic Healthcare Consultants of Reidsville to produce a report on same-day surgery center services and costs. There are 114 ambulatory surgery centers operating in North Carolina, about half as many as other states based on population, the report says.

Procedures at those surgery centers are 33 percent less costly than those done at hospitals, according to the report.

Hospital association spokesman Don Dalton agrees that rates are higher in hospital settings, which stems from the fact that hospitals take on more complicated cases than same-day surgery centers. They include uninsured patients, those with multiple health problems, and patients who need emergency surgery, Dalton said.

Adam Linker, a health policy analyst at the N.C. Justice Center, agreed that hospitals face extra expenses due to the types of patients they see.

“Surgery centers cherry pick the healthiest, wealthiest patients and leave the hospitals financially stranded with the most expensive patients,” Linker said. “People are not going to come to an outpatient orthopedic center for surgery if they also have cardiac issues or mental health issues. Patients that have a whole lot of things going on at the same time are very expensive to care for.”

Laura Easton, chief executive officer of Caldwell Memorial Hospital in Lenoir, said hospitals need income from uncomplicated orthopedic, ophthalmological and endoscopy procedures to help offset losses in areas such as the emergency department and critical care.

Hospitals say they face other income cutbacks. Funding for North Carolina’s Medicare program will face $7.8 billion in cuts over the next 10 years as part of revisions under the federal Affordable Care Act, which anticipated additional Medicaid funds to make up the loss. State leaders decided to opt out of the Medicaid expansion program based on fears that federal funding could run out and leave the state responsible for covering as many as 600,000 additional people.

Similarly, subsidized health insurance policies authorized through the Affordable Care Act are not set up to cover people who could have been added to Medicaid rolls.

“The Affordable Care Act assumed all states would expand Medicaid,” the Justice Center’s Linker said. “We still expect more of these people to be going to hospitals for treatment, and then the hospitals will have to pursue them for payment. It’s the worst-possible situation for everyone.”

Supporters of the certificate-of-need amendment have been critical of hospitals’ efforts to provide charity care for poor patients, which in North Carolina averages less than 4 percent of overall hospital expenses. The bill would require that same-day surgery centers provide charity care equal to 7 percent of their business each year.

Hospitals provided $902 million in charity care across the state in 2011, the most recent figures available, according to the N.C. Hospital Association. But total uncompensated care was closer to $3 billion, Dalton said.

The larger figure also includes $817 million from losses on Medicare reimbursements, $569 million from losses on Medicaid reimbursements, and $710 million in “bad debt” – unpaid bills for patients who did not qualify or did not present the financial information needed to qualify as charity care.

“We know that all businesses have some bad debt,” Dalton said. “But for us the difference is that we do not stop serving people because they don’t pay.”

Elder: 919-829-4528

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